Linking Breaches, Brand Reputation & Stock Prices

 
 
By Karen A. Frenkel  |  Posted 06-20-2017 Email
 
 
 
 
 
 
 
 
 
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    Linking Breaches, Brand Reputation & Stock Prices
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    Linking Breaches, Brand Reputation & Stock Prices

    Data breaches can damage brands and cause stocks to tank, but many IT practitioners and CMOs don't think their senior management understands the connection.
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    Average Stock Price After a Data Breach
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    Average Stock Price After a Data Breach

    Stock prices drop an average of 5% immediately after a data breach is disclosed.
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    Recovery of Stock Price After Data Breach
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    Recovery of Stock Price After Data Breach

    Companies that reported superior security postures and responded quickly to a breach recovered their stock value after an average of seven days. Those with poor security postures that did not respond quickly saw their stock price decline for an average of more than 90 days.
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    Difference in Loss of Share Price
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    Difference in Loss of Share Price

    The difference in the loss of share price between companies with a low security posture and those with a high security posture averaged 4%.
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    Effect of Data Breaches on Customers
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    Effect of Data Breaches on Customers

    31% of consumers in the survey said they discontinued their relationship with a company that had one data breach. Of those consumers, 65% said they lost trust in the breached organization.
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    Customer Loss Rates Lead to Revenue Loss
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    Customer Loss Rates Lead to Revenue Loss

    Of the 113 companies sampled, 2% had low customer loss rates and an average revenue loss of $2.67 million. Those that lost more than 5% of their customers had average revenue losses of $3.94 million.
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    Differing Perceptions of Brand Value Losses
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    Differing Perceptions of Brand Value Losses

    Loss of brand value is the biggest cost of a security breach for 71% of CMOs, whereas only 49% of IT practitioners see brand diminishment as the biggest cost.
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    Data Breach Is Top Threat to Brand Value
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    Data Breach Is Top Threat to Brand Value

    A data breach is a top threat to the reputation of a company and its brand value, but 45% of IT practitioners and 42% of CMOs don't think brand protection is taken seriously in the C suite.
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    Who's Responsible for Brand Protection?
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    Who's Responsible for Brand Protection?

    66% of IT respondents don't think it's their responsibility to protect their company's brand. Of these, 50% do believe that a security incident would diminish the brand value of their company.
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    Allocation of Budgets to Protect Brands
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    Allocation of Budgets to Protect Brands

    37% of CMOs said part of their marketing and communications budget goes toward brand preservation, but only 21% of IT practitioners allocate a portion of IT's security budget to brand preservation.
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    Consumers' Expectations of Personal Information Security
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    Consumers' Expectations of Personal Information Security

    80% of the consumers surveyed believe companies have an obligation to secure their customers' personal information, but only 49% of CMOs and 48% of IT practitioners agree.
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    Who's Responsible for Controlling Access to Data?
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    Who's Responsible for Controlling Access to Data?

    71% of consumers believe companies are obligated to control access to their personal information, but only 47% of CMOs and 46% of IT security practitioners agree.
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    Questioning Consumer Trust in Industries
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    Questioning Consumer Trust in Industries

    80% of consumers said they trust healthcare providers to preserve their privacy and protect personal data, but only 26% of consumers trust credit card companies. Yet healthcare companies account for 34% of all data breaches, while financial organizations account for only 4.8%.
 

How are a company's reputation and the value of its stock affected by a data breach? The answer to that question was the goal of a new study, "The Impact of Data Breaches on Reputation & Share Value: A Study of U.S. Marketers, IT Practitioners and Consumers," conducted by the Ponemon Institute and sponsored by Centrify. The study reveals that 45 percent of IT practitioners and 42 percent of CMOs do not believe their senior management understands the importance of preserving their company's reputation. "To protect brand and reputation, it is critical for the C-suite and boards of directors to address consumers' expectations and how their personal information is used and secured," the report said. The study presents views of 448 executives in IT operations and information security, 334 senior-level marketers and corporate communication professionals, and 549 consumers. For the economic analysis of stock prices, the researchers selected 113 publicly traded companies that experienced a data breach involving loss of customer or consumer data. They created a portfolio of the stock prices of those companies and traced the index value for 30 days before the data breach was announced and 90 days following it. Here are highlights from the report.

 
 
 
 
 
Karen A. Frenkel writes about technology and innovation and lives in New York City.

 
 
 
 
 
 

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